Why Corporate Solar is Taking Off
Across the U.S, companies are embracing solar energy, driven by public commitments to reduce greenhouse gas (GHG) emissions and achieve sustainability goals, as well as the realization that solar makes good business sense. Today, more than half of Fortune 500 companies have clean energy or GHG reduction goals.
General Motors has set a goal to obtain 125 megawatts (MW) of onsite clean energy by 2020. That includes a commitment to double solar energy production from 30 MW to 60 MW across manufacturing facilities in thirty countries.
At Apple, 93% of its facilities worldwide now run on clean energy. To get to a goal of 100%, Apple is both building onsite facilities and buying clean energy. The company has invested $850 million in a 130-MW solar farm in Monterrey County, CA that will power all of Apple’s California facilities.
Onsite generations and PPAs
Solar’s expansion is occurring in two ways: on-site solar generation and procuring energy through Power Purchase Agreements (PPAs). PPAs are long-term contracts that enable a company to obtain a fixed energy price without making a capital outlay for a project and having responsibility for its operations and maintenance. In 2015, offsite volume procured through PPAs reached 3.2 GW (the majority of which was solar), a 275% increase from 2015.(1)
In 2015, on-site solar generation reached 850 MW, with retail and big-box stores like Walmart and Ikea leading the pack, installing projects totaling 397 MW. The Solar Energy Industry Association’s annual survey found that the sectors seeing the largest onsite project volume were retail, warehouses/distribution centers, office buildings, and corporate campuses, totaling 665 MW. Warehouse and distribution centers are particularly well suited to solar, thanks to their vast unutilized roof space.
Commercial owners seek returns and savings
It’s not only large corporations that are going solar. Mid-sized businesses and commercial property owners are installing on-site systems, attracted by the fact solar is good for the bottom line. Companies are able to deploy an unused asset, a rooftop, in an investment that can produce returns in excess of 12%.
Also, a solar system can reduce energy costs — no small issue in New England, which has among of the highest electricity prices in the nation. In structuring a solar project, a company can utilize a PPA to secure stable, long-term energy prices, reducing energy costs and providing a hedge against price volatility. That can be a particularly important benefit to firms in energy-intensive industries like manufacturing where energy costs can represent as much 15% of operating costs. (2)
In addition, the price of solar has steadily dropped, with the installed cost of commercial solar falling to $2.19 per watt in 2015, a 13% drop from 2014(3). Declining installed costs, combined with attractive state and federal incentives have all acted to enhance solar project financial viability.
1 Rocky Mountain Institute
2 U.S. Energy Information Administration
3 Sol Systems